OPEC’s El-Badri calls on global oil producers to help curb glut
LONDON (Bloomberg) -- The head of the Organization of Petroleum Exporting Countries said he wants oil producers outside the group to assist in reducing the global oversupply, signaling once again that OPEC won’t make output cuts alone.
“It is vital the market addresses the issue of the stock overhang,” Secretary-General Abdalla El-Badri said Monday at a conference in London. “It should be viewed as something OPEC and non-OPEC tackle together.”
Crude sank to the lowest in more than 12 years this month as supply swamped demand. With OPEC effectively abandoning its output ceiling in December, Russia pumping near record levels and U.S. shale fields proving more resilient than forecast, the global surplus has continued to swell. Crude stockpiles in the U.S., the world’s largest oil consumer, were more than 100 MMbbl above the five-year average at the end of 2015.
“It is crucial that all major producers sit down to come up with a solution to this,” El-Badri, 75, said at the Chatham House think-tank. There are signs supply and demand will start to come back into balance this year, he said, citing a forecast increase in global demand of about 1.3 MMbopd, and a contraction in non-OPEC supply of about 660,000 bpd.
Risking Investment
Brent oil, the global benchmark, is down about 16% this year as volatility in global markets adds to concern over brimming U.S. stockpiles as well as the prospect of additional Iranian exports following the removal of international sanctions. The slump in prices is putting future investment in new oil supply at risk, according to El-Badri.
“New barrels are needed not only to increase production, but to accommodate for decline rates from existing fields,” he said.
OPEC’s de facto leader, Saudi Arabia, has refused to curtail output as it pursues a strategy to defend market share and pressure rival producers with lower prices. The kingdom has said it won’t reverse course unless non-OPEC nations play their part in production cuts, a view backed by El-Badri on Monday.
“Until 2015, all of the supply growth since 2008 has come from non-OPEC countries,” he said, conceding that “this dynamic changed” last year, when OPEC supply grew by about 1 MMbopd. The five-year average level of commercial stockpiles in the Organization for Economic Cooperation and Development rose to a surplus of more than 260 MMbbl at the end of 2015 from a negative 85 MMbbl in 2013, he said.
El-Badri, a Libyan native, was given another extension at the last OPEC meeting to remain as secretary-general until July. Originally due to step down in 2012, El-Badri’s term has been extended several times as members fail to agree on successors proposed by Saudi Arabia, Iran and Iraq.
